Papers by Dominique Lefebrve
The adoption of a single currency in Europe has revived the problem of the accession of a currenc... more The adoption of a single currency in Europe has revived the problem of the accession of a currency to the status of international currency. The article presents the internationalization criteria generally used-the size of the issuing economy, its degree of trade openness, the choice of anchoring currency of third countries-to predict the emergence of the euro as an international currency.. These criteria of internationalization can in fact be widely discussed because they are based on an explanation of the internationalization of currencies by reasons of detention become less relevant in a context of increased financial flows. This is why the article shows how the process of internationalization of the euro can be based more on the development of financial flows denominated in this currency. In this perspective, the unification of the financial markets of the euro zone is a means of increasing liquidity that can create the conditions for the internationalization of the euro. The currency question multiplicity explains the absence of the factors of the difficulties of a justifying encountered theory of the internationalization if one to evaluate this internationalization. This difficulty is coupled with a question about the weight of each factor and the way they combine. As a result, the authors who have sought to define the origin of the internationalization of currencies refer to several theoretical fields and rely on empirical work based on past internationalization experiences. However, the context being different, these are not necessarily transposable to the euro. Nevertheless, the criteria of internationalization traditionally invoked to explain the accession of a currency to the status of international currency can be retained: the size of the emitting economy and its commercial openness will thus be decisive in the choice of the currency third countries. The link between the fundamentals of an economy and the internationalization of its currency will be presented in the first part. In a second part, we will explain why, in the context of the development of financial transactions, we should give less importance to internationalization linked to fundamentals alone. The relative size of financial transactions has become such that it effectively limits the scope of the traditional determinants that essentially explain the international diffusion of a currency by real flows. The internationalization of the euro will ultimately depend more on the financial flows that will be denominated in this currency. The size of the euro area financial markets and their liquidity will be decisive in this problem. It is believed that a currency becomes international when it performs its functions outside its frontiers of issuance, even if his ability to exercise them can be both partial and reversible. As a medium of exchange, the international currency is used by private agents for direct exchange, but also as a vehicle for the settlement of commercial and financial transactions. The international currency is also used as a medium of exchange by the central banks to effect the intervention on the exchange markets. Private agents use the international currency as cash to quote and invoice exchanges or to label financial assets. It is also used as a unit of account by official institutions in defining exchange rate parities. It serves as a store of value for the private and official sectors.
Uploads
Papers by Dominique Lefebrve